NY Times trumped by Twitter

About six weeks ago, The New York Times published a blistering opinion piece attacking America’s biggest retailer Walmart for everything from business practices to its contribution to income disparities. It suggested Walmart was a drain on taxpayers and forced its staff to resort to food stamps and welfare as a result of humiliating wages.

While the piece wasn’t surprising given the paper’s reputation for point-scoring against big retailers, what was unexpected was how the historically conservative retail company chose to respond. Rather than writing to the editor, seeking to obfuscate or pulling advertising, Walmart struck back directly via social media.

Assuming the persona of a journalism tutor correcting a cub reporter’s draft, Walmart vice-president of communications Dave Colvart literally got out the red pen and performed a “fact check” on the NYT piece, pulling the esteemed publication up on a variety of errors and providing hyperlinks to validate facts. It published this “Fact Check” on the Walmart blog then threw its own social-media resources at distributing it. And, when you have 545,000 Twitter followers and 36 million Facebook “likers”, that’s one heck of a social network.

The masterstroke was a little comment penned at the top of the marked-up manuscript: “Thanks for sharing your first draft – below are a few thoughts to ensure that something inaccurate doesn’t get published”.

The sweet irony of this wasn’t lost on The New York Times, which struggled for a smart response or the right voice to respond in. The New York Times has weekday print circulation of around 600,000. Together with the accumulated readers on its various digital assets, that makes its total weekday circulation around 2.1 million — significantly less than the shadow thrown by Walmart’s social-media machine. And while the contents of the Walmart blog itself came up for criticism, there’s no doubt that it got the full attention of the biggies in the news business as they realised that their distribution network was again under threat.

Closer to home, the turning of tables on traditional media players by big business is perhaps best personified by Rod Drury, the chief executive of Xero. More than any other, he effortlessly integrates social media (and specifically Twitter) into his working day and harnesses it for both marketing leverage and thought leadership.

Three years ago at NetHui, he reduced his entire presentation to series of sub 140-character tweets, published on Twitter at the sametime as they were PowerPointed to the 500 attendees. The contents including giving The National Business Review a pretty good drubbing for allowing non- identified people to comment on stories. Drury saw this as not just allowing – but effectively encouraging – trolls. Nothing to do with bridge- dwelling goat-eaters nor anglers towing a lure behind a boat, trolls are effectively provocateurs who seek to start arguments or upset people by posting provocative or corrosive remarks online.

Drury not only attacked this on stage and via his tweets, but also called out the journalist concerned by name at NetHui to justify the policy. For many in the room, it was the first experience they’d had of a captain of industry directly challenging part of the Fourth Estate. On the one hand, it was compulsive viewing; on the other, you didn’t know where to look.

Last week, Drury used the same technique at the Xero annual meeting to challenge a Fairfax journalist present who had written a story questioning Xero’s growth aspirations in the United States. Drury was concerned that the source quoted in the story, certified public accountant Michelle Long, wasn’t clearly enough identified as having contracted for his key American competitor Intuit. The story did note “Xero’s US rival Intuit had asked her to conduct a lot of training on its Quickbooks cloud-based software over the past year”.

Rather than wait for the AGM to address his concerns, Drury took to Twitter soon after publishing, posting about what he called the “interview adviser on competitor payroll trick” and also to call out Long whom he tweeted: “you’re a nice person, we certainly like you. When commenting on us you should declare you are on the Intuit payroll”.

Regardless of the rights and wrongs, the development is significant as it’s another way social media has fundamentally disrupted journalism. Initially it was just a way of promoting a story to more readers for free. It quickly spread to being a news source, a tip-off mechanism, a source of photographs and a research tool to get expert (self- professed and actual) comment.

However it’s now also a way for the subject of a story to publish their own perspective of events and, in the case of Drury, distribute it to tens of thousands. In the yeasty cut and thrust of social media, it’s also likely that such people, who have full executive authority and board backing, may be able outmanoeuvre the journalist in online forums. Particularly as journalists understandably prefer to report the story, rather than be the story.

Expat Kiwi Greg Foran has just taken the top job at Walmart. If he’s looking for a spot of social- media coaching, he could do worse than ask Drury for a few pointers.

Clicks to mortar – telling the mutton from the lamb

 

Can you tell lamb from mutton?

The lambing season in our little rural community has been in full swing this last month, and for my young daughters Christmas has come early.

Each morning on their way to school they try to spot the newcomers, and keep a watchful eye on the wellbeing of the earlier arrivals.

There’s a pair of black lambs with bouffant hair dos they’ve nicknamed Elvis and James Brown, and a family of triplets they are always concerned for.

Last week we got a call from a local farmer saying he’d had a ewe get herself cast in lambing, and had a new-born lamb with no mum; and would we like to take care of it?

To the pint-sized crowd there’s only one answer to that question and now Kevin the lamb is firmly ensconced in the O’Donnell household.

From a scrawny three day old, hungry orphan Kevin is now a three week old bundle of energy who follows the girls like a puppy, and has a makeshift condo set up in a loosebox that would rival many motels I’ve stayed in.

Beef and Lamb New Zealand’s Economic Service has predicted a reduced national lamb crop this year expected to be back about 2 million lambs to 24.4 million head.

I reckon if they gave more of the motherless lambs to small children they might be able to mitigate such a loss.

Another report recently suggesting losses was BNZ’s shiny new Online Retail Sales Monthly Index, measuring online sales at local retailers and offshore merchants using data from BNZ’s debit and credit card transactions.

Like other reports before it (such as Frost and Sullivan, and Nielsen) the report found close to 60 per cent of New Zealand’s online retail sales are from domestic merchants, but also found that offshore merchants are gaining market share.

For the three months ending September 2013 online spending was up by 15 per cent on the same time last year (about half the rate of growth of two years ago). In comparison, traditional retail sales recorded much weaker growth, with the latest quarter up just 3% on the same quarter last year.

Meanwhile, international online sales growth is now outstripping domestic online sales by 10 per cent. Local retailers will be hit doubly, both the loss from offline to online, and the loss from local online to offshore online.

The sectors most affected appear to be department and variety-style stores, cosmetics and fashion, and home appliances – together accounting for 76 per cent of online spending.

For traditional retailers, none of this is good news. Current projections see eCommerce topping out at around 20 per cent of all retail, though it’s likely to be several years away.

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Recently however the opposite has started happening in the United States with previously online-only stores setting up physical premises.

Sometimes these are temporary pop-up stores to showcase a new range, but increasingly eCommerce firms are setting up experiential stores where consumers can touch, taste and smell stuff before they buy it.

It’s nothing new of course – Steve Jobs opened Apple’s first physical store back in 2001.

It was never designed to make a profit at the New York City location; rather it was designed to communicate the brand and philosophy of Apple, and illustrate how their products fitted people’s needs.

Global online art and craft giant Etsy now regularly sets up stores to engage with the community and showcase goods.

Craftily these stores consist mainly of artisans who buy their supplies on Etsy and use the space to market their creations to buyers, so rather than a business to consumer play it’s got a consumer to consumer feel.

Upmarket menswear retailer Bonobos was originally set up in 2007 as an online-only business but later found it necessary to provide experiential stores to deliver the sizable growth they were after.

These stores are about service and experience only, and don’t actually allow you buy stuff. Other examples include online optician Warby Parker and custom shirt maker Proper Cloth.

But perhaps the most significant move in the clicks to mortar trend happened just last month when eBay launched a new local collection service. This allows consumers to buy from the eBay website then select a handy physical location to actually pick up the items from, similar to Amazon’s locker service.

Locally The Warehouse has just done the same thing with their “click and collect” service.

Given the concentration of the New Zealand population across a handful of cities, I reckon it won’t be too long until we start to see the same thing locally. And for some of the traditional retailers facing hard times it might be a win/win situation, allowing them to defray their rental expenses while also bringing online shoppers into their stores.

One of the criticisms made of online buying is that it’s sometimes hard to tell when an item is mutton dressed up as lamb. The clicks to mortar trend is a neat way of mitigating that risk.

Emersons – too tasty for Lion to ignore

Last week I was lucky enough to stay at The White Swan Hotel in Greytown, home of the modern Arbour Day celebrations and claiming what is apparently one of the most complete main streets of Victorian architecture in New Zealand.

The White Swan began life as the New Zealand Railways administration building at the Woburn railyard in Lower Hutt, but in 2002 the building was cut into six pieces, relocated over the Rimutaka Range and reassembled in Greytown.

When I visited last week it offered great food, stylish rooms and warm service. The only thing missing was some great Kiwi craft beer.

Craft beers in New Zealand have moved from the fringe to the mainstream thanks to outfits such as Christchurch’s Three Boys and Harrington’s, and Wellington’s Garage Project and Yeastie Boys. No such tasty brews were available at the White Swan, which I thought a tad unusual for such a tasty pub.

Then I noticed a pattern to all the brews on offer – which included Monteith’s, Sol and Tiger – all were brewed or distributed by Heineken-owned DB.

It’s pretty well known, by drinkers anyway, that New Zealand’s brewing market is dominated by Japan-based Kirin and Netherlands-based Heineken. Together this duo controls virtually all of the big beer brands sold locally, from Steinlager and Canterbury Draft, to Heineken, Tui and Stella.

And last week Kirin grew a little larger thanks to its acquisition of Dunedin’s Emerson Brewing Company, via its 100 per cent-owned local subsidiary Lion.

The purchase was more than a little ironic, given the colourful Richard Emerson set up his craft brewery in 1993 selling unpasteurised beer after becoming disillusioned with the generic taste of the big breweries’ offerings.

I first sampled Emerson’s when a Dunedin scientist mate sent me some London Porter claiming it had aphrodisiac qualities. Soon after, I discovered Bookbinder which became a quick favourite. Thereafter, if I was within 300 kilometres of Dunedin, I would detour via Wickliffe St and fill the boot of my gently corroding MGB Roadster.

Subsequently Richard Emerson became a central figure in the craft beer vanguard, celebrating taste, tradition and idiosyncrasy. The quality of his output became recognised globally, and invariably he attracted the attention of the Dutch and Japanese giants.

Contrary to the PR spin, I’m not convinced brewing moguls like acquiring small breweries. The little guys spend too much on ingredients and their volumes are too small to deliver the cost efficiencies of the mainstream brews, so the moguls begin “value engineering” them. And the iconoclastic founders often make poor team players. However, as the popularity of their product grows, so do the value of these crafty brands until they reach the point where they become too painful to ignore.

I don’t blame the big brewers for buying brands like Emerson’s, Mac’s and Monteith’s – it’s commercially astute, as long as they don’t overpay. And I have nothing but admiration for the likes of Richard Emerson who turned a vision of quality ales into a global brand and a commercially successful company.

But there are two things that make me cough into my beer glass.

The first is, what will happen to the diverse and tasty lineup of unpasteurised beers that Emerson’s offer up? Big brewers make money out of volume, and I would be surprised if the likes of Taieri George or Whisky Porter will last for long. Mind you, as my wife constantly reminds me, I am not in the middle of the bell curve when it comes to beer.

The second and more worrying thing is the impact of the large breweries tying up distribution in New Zealand. Pubs are not always particularly profitable businesses, so the rebate structures offered by the big brewers are hard to resist.

But enticing pubs to enter into these exclusive supply agreements keeps craft breweries out of pubs, and tasty brews away from customers’ glasses.

More important from a commercial perspective is the exclusionary effect such control and incentivisation has on new entrants.

The Commerce Act has provisions which are designed to prevent a business taking advantage of its dominant position in a market for an anti-competitive purpose. I wonder if the independent brewers have ever thought of taking a class action against one of the two biggies?

If you go to Greytown, you should check out Stella Bull Park, named for the Wairarapa woman who did so much to make the town beautiful. There is a park bench there which notes: “Only God can make a tree.”

I’m of the mind that only an iconoclast can make a truly great beer. It’s just a shame that the incentivised distribution structure barricades these brews from the fridges of so many pubs in New Zealand.

Beervana, Facebook, hangovers and overhang

Last week Wellington hosted the beer appreciators shindig of choice – Beervana.

No glorified booze-up this, Beervana is the country’s largest craft beer festival and features over 250 craft beers. With brews including the likes of Day of the Dead, Coffee and Fig Ale, and Hop Zombie, it’s clear evidence that we’ve moved on from the bland brewing duopoly that I grew up with.

Sadly, come the next morning I found it delivered the same sort of hangover. Also currently suffering a hangover are the thousands of people who bought into the Facebook IPO. Right now, for every dollar investors put into the social network three months ago they have about 56 cents.

In July the tale of value destruction got worse, when Facebook revealed in its quarterly filing with the US Securities and Exchange Commission that around 83 million of its user accounts may be fake and another 45 million may be duplicates.

Nominally Facebook has around 950 million members, so the news that over 10 per cent of that customer base may be imagined rather than real is likely to get the market’s full attention. Sure enough Facebook’s already ailing share price plunged faster than a neckline at a cougar bar, bottoming out at $19.88 before recovering to around the $21 mark.

The most anticipated IPO of the last few years, Facebook had a strike price of $38 but within two weeks it was south of $30 and continued an unsettling slide ever since.

The good news is that Facebook is keeping good company. There’s been a gaggle of American internet IPOs over the last two years and most of them have been diabolical performers.

The worst I have seen is group buying website Groupon which is now down more than 60 per cent on its listing price. Not far behind is game-provider Zynga and online radio company Pandora which are both more than 40 per cent down on listing price. Meanwhile review website Yelp’s shareprice has lost 20 per cent of its value. Taken as a whole you could be forgiven for thinking the clock had turned back to the dotcom crash of 1998.

There has been one standout web entrant to the listed market world however, and that is LinkedIn. Often incorrectly described as “Facebook for grown-ups”, LinkedIn is part recruitment service and part business development tool.

Unlike Facebook it uses a “gated-access” model. This means contact with a business professional requires either an existing relationship, or the intervention of a contact to make the connection. Significantly LinkedIn has signed up to EU’s International Safe Harbour Privacy Principles, privacy not normally being seen as Facebook’s strong suit.

And whereas Facebook is finding it challenging meeting financial targets, LinkedIn just reported stellar second quarter results. Revenue was up 89 per cent compared with the same period a year ago and earnings were $50.4 million, compared with $26.3 million for the second quarter of 2011. Unlike Facebook’s dependency on advertising, LinkedIn has three revenue streams – its employment business, its marketing business and a premium subscription business – providing useful income diversification.

Even at its current $20 level significant doubt remains at what is reasonable value for Facebook. The kicker is price to earnings ratio (PE). At $20 Facebook is trading at about 30 times the company’s estimated earnings for next year. By comparison Apple, Google and the newly renovated eBay are trading around 15 times next year’s predicted earnings.

But there could be more bad news for Facebook, this time from within – specifically, from the 1.7 billion shares owned by staff and insiders which have been “locked up” by a post IPO trading blackout. From August to November those blackouts will lift, meaning for the first time they will be able to sell. These are staff who until now have had paper wealth in an illiquid company, so there is likely to be good appetite to convert paper wealth into the real stuff.

The problem is simple supply and demand economics. As these shares get unshackled supply is about to go through the roof, this at a time when demand is at an all time low, as measured by share price.

The kicker here is the extent of that supply. Back in May Facebook listed with 421 million shares being made available to investors through the IPO. Over the next three months four times that number of shares will be available for trading.

Looking at it that way the problem isn’t so much a hangover for existing Facebook investors. It’s more about overhang. Specifically the huge overhang that a four-fold increase in supply will bring. Perhaps next year at Beervana we might see a Facebook Fizz – an expensive little drop with sweet frothy head, but with little underneath.

Mike “MOD” O’Donnell is a professional director, author and eCommerce manager. His favourite tipple is the Garage Project’s Pernicious Weed.

Ever get the feeling you’ve just been cheated?

Thirty-six year ago next week, one of punk rock’s milestone events happened: two newly formed groups – The Clash and The Damned – had their public debuts, opening for the Sex Pistols at the Black Swan in Sheffield, England, in July 1976.

Both the bands and the individuals – including the infamous Johnny Rotten and the irreproachable Joe Strummer – would go on to form and influence dozens of rock bands in the next 30 years; from Guns N’ Roses to U2, Blondie, Elvis Costello and Bruce Springsteen.

The Sex Pistols would last only another 18 months before imploding in San Francisco in January 1978, with Rotten at loggerheads with manager Malcolm McLaren, while guitarist Sid Vicious was in a self-destructive spiral that would end in suicide later that year. My mate, Craig, is a punk rock fanatic and can quote chapter and verse on this stuff.

I caught up with Craig last week for a couple of beers and a yarn. Knowing my interest in cyber anarchy, Craig told me an interesting story. Sadly, a close friend of his recently separated from her husband of 15 years.

Unsurprisingly, she didn’t feel emotionally or physically capable of notifying her circle of friends of the news in person, so she chose a less challenging mechanism.

She sent out an update email to friends via her Gmail account and also direct messaged a few mates on Facebook, telling them the unhappy news.

Soon after she noticed a radical change in the advertisements she was being fed via both these channels. At the top of her Gmail she started to notice she was being recommended divorce lawyers.

To be clear, she hadn’t been Googling divorce lawyers, they just started appearing at the top of her Gmail every day along with suggestions that it could be a good idea to make contact with one.

On Facebook it was less subtle. Every time she logged in to the social network she would have dating websites flashed up at her.

Not necessarily very subtle dating websites either, replete with promises about how many guys there were out there wanting to connect, ideally tonight.

While she was aware Google and Facebook made their money from delivering targeted ads, she’d never thought about just how targeted those ads were, or how personally they did the targeting.

Suddenly it became obvious that someone (or more likely something) was monitoring the content of all her personal messages and then using that content analysis to decide who would pay the most to engage her.

She then did the right thing and checked out their policies.

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Sure enough, the policies gave notice that the net giants might carry out content extraction in order to be able to serve up supposedly useful product and service suggestions. It’s funny how different you feel when you find out how intrusive that can be.

Social media researcher Dana Boyd has written about how traditionally people’s lives were private by default and public by action; but in the cyber age it’s become weirdly reversed. Today, many of our lives are public by default and private by action.

While it’s questionable whether people ever read the privacy policies and terms they sign up to when using a service like Facebook, for the most part they do actually tell you what they are going to do with your data (and in many cases this includes selling it). Of more concern is the growing number of online behavioural tracking companies who make a business out of pulling together all the data you leave behind as you negotiate the internet.

These businesses hoover up all the information you leave behind you as you live your digital life.

There is no opting in or out.

Mozilla Corporation chief executive Gary Kovacs has estimated that for every website you visit there are five behavioural tracking web services following you and recording what you do. Kovacs found that during the period of one typical day he ended up identifying 150 behavioural tracking websites that had sucked in data from him, without his permission.

Influenced by this, his company, Mozilla, recently launched a free add-on to its Firefox web browser called “Collusion” which shows all the behavioural tracking sites following you through the digital woods.

I installed it and have been deeply unsettled by the results, seeing the spider-web of interaction between companies and other trackers.

You might want to do the same.

The Sex Pistols played their last gig on January 14, 1978, at the Winter Ballroom in San Francisco. Their last song was Iggy Pop’s No Fun.

After the song ended, Johnny Rotten shouted: “Aha, ever get the feeling you’ve been cheated?” and walked off.

In a digital world where it’s becoming increasingly clear that we are not customers of the global web giants, but rather a product generating data for the giants to sell, we might well ask the same question.

Firing Both Barrels At The TPP

Duck shooting season opened three weeks ago, and so far it’s been a pretty fickle season.

While Canterbury and Marlborough shooters have reported some good hauls, further north it’s been decidedly average.

While clear skies and sunshine are good news for most, they have worked against shooters in the Wellington region, giving the ducks decent visibility and affording them plenty of height.

Shotgunners are now required to use steel shot for ”environmental reasons”. Steel travels slower and delivers less impact than lead, so any ducks more than about 35 metres away are pretty safe.

A year ago, my daughters and I were treated to a near limit bag the first time we went out on the Manawatu River.

This year we ended up with one hapless mallard. Not a great return on the money we had invested in ammo, licence and decoys, but a great day out nonetheless.

Interestingly, the amount you need to invest into duck shooting kit has dropped markedly over the last 20 years.

When I first went duck shooting as a schoolboy in Timaru 25 years ago, a box of cartridges cost $25 (equivalent to $78 in 2012) and decoys were $35 apiece. Today you can buy a box of 12 gauge shells for $14 and a dozen decoys for $90.

A key contributor to these reduced costs is parallel importing.

This allows retailers and other parties to source goods directly from licensed overseas sources, rather than dealing with local licensees. In doing so, it delivers competition between sources of the same or similar goods, and real benefits to consumers.

Back in 1998, the Copyright Act 1994 was amended so that copyrighted goods lawfully made overseas could be imported into New Zealand without the consent of local copyright owners.

This practice of parallel importing lowered the cost of a huge range of consumer goods, from Levi’s through to L’Oreal.

Ironically parallel importing will likely be a victim of the proposed Trans Pacific Partnership agreement (TPP), a multilateral free trade agreement which aims to liberalise the economies of the Asia-Pacific region including New Zealand, Australia, the United States, Chile, Singapore, Malaysia, and Vietnam.

Supporters say the TPP will boost trade by $1.1 trillion, with the latest set of negotiations commencing in Dallas last week.

However, the benefits for trade which flow out of the TPP are accompanied by a whole set of obligations for intellectual property in New Zealand, including parallel importing. As a result, it’s likely local rights holders would be able to prevent parallel imports (and, consequently, increase the margin that consumers pay).

Ad Feedback The implications are far broader than just cheaper jeans and shampoo.

According to leaked documents from the American TPP negotiation team, the United States is demanding a huge raft of changes to intellectual property law in New Zealand.

This would see fundamental copyright changes in Godzone, including the return of the repealed Section 92A of the Copyright Act (guilt on accusation), the removal of ”fair dealing” for accidental copying (like when your browser hits copyrighted material), and a requirement for ISPs to give up customers’ details when they receive a allegation from a rights holder.

After the pain and energy that the local internet and intellectual property industry has gone through to end up with a copyright regime that does a pretty good job of balancing rights with internet pragmatism, this would be a serious slap in the face.

Not to mention a cost to consumers and a risk to all citizens.

It appears our officials realise this and are providing solid pushback thus far.

Other leaked documents suggest Ministry of Foreign Affairs and Trade officials have told the Americans that we wish to stick right where we are and not enter into any additional obligations around copyright.

If you think there’s been a lot of leaking going on, you’re not wrong.

On his blog http://www.lawgeek.nz web lawyer Rick Shera suggests the leaks from the US Government are calculated attempts to expose extreme positions, allowing a graceful ”back down” to terms that are still way more draconian than we have now. He could be right.

Right now all we know for sure is that behind the free trade carrot being dangled in front of New Zealand exporters is a huge copyright stick that seems to ignore the internet rather than work with it.

And it would likely make a dead duck of parallel importing as we know it today, along with the end of cheap ammo and decoys for rednecks like me.

Ducking Zombies and Hugging Shadows

In the late 1990s I was lucky enough to periodically work with two of the doyens of advertising in New Zealand, Kim Wicksteed and James Hall.

Apart from their hunger to deliver the best, the thing I noticed about the Saatchi boys was their readiness to embrace the unlikely or unattractive, and use it to communicate and engage.

They called this philosophy “hugging the shadow” and used it to great effect. From the Absolutely Positively Wellington campaign to the original bugger campaign with Toyota, they owned the market for over a decade.

I’m not sure if Mike Keenan has ever studied the theory of advertising, but the Hokitika Wild Food Festival is a spectacularly successful demonstration of hugging the shadow. Over the last two decades, Mike and his Westland crew have taken a rough-as-guts stereotype, applied a good-as-gold West Coast implementation, and delivered up a colourful event that draws 15,000 visitors to the unlikely venue.

When I walked up to the information stand at last weekend’s 23rd annual Wild Food Festival, the smiling local offered me the choice of a pig tattoo or a bottle of chlamydia. The purple tattoo was temporary, and the bottle a cleverly engineered campaign to raise awareness of sexual health, but again the overall effect is to take the unlikely and use it to engage directly.

This year there were over 70 stalls delivering up everything from flambeed grasshoppers on toast, to rabbit pate and colostrum dessert. And of course the whitebait. I don’t know if there is any formal price control in place, but nothing costs much over $5, which means $50 will buy you 10 weighty whitebait patties, reason enough to make the migration.

The great thing about Hokitika is that it’s damn awkward to get to. This virtually forces you to take a road trip through the Godzone landscape and find out first-hand how different towns undertake destination marketing. My observations are that some have got their poop-in-a-scoop better than others.

On the outskirts of Havelock, a large billboard explains you are entering the Greenlip Mussel capital of the world, but there’s only one mussel cafe and it was closed. I resorted to the local Four Square, apparently the only place you can pick up the delicious treat, after none of the locals had the time to advise a tourist where to buy. Hopefully they do a better job at their mussel festival.

Ad Feedback Other small towns present a more unified campaign to snare the tourist dollar. Former gold town Ross is a great example. I called in to look at an old Moto-Guzzi for sale, but then got told that I had to check out the pub.

Arriving at the pub, our hostess Hillary welcomed my family and me, and extolled the virtues of the art gallery. And then once we were at the art gallery, told me the story of the town.

Good destination marketing is about taking a visitor-centred approach to the economic development of a location, then integrating the interests of visitors, residents and service providers. Ross personifies community-based destination marketing at its best.

Meanwhile, back at the Wild Foods Festival, costumes are the latest craze with competitions for the best-dressed, much like Wellington’s Rugby Sevens. And this year the place was overrun by zombies, including a fair number who appeared to have just escaped from a hospital.

Today the Hokitika Wild Food festival has to be capped at 15,000 tickets, brings in over $3 million of revenue over two days, and you need to book accommodation almost a year out. Hugging the shadow has paid in spades for this town of 3000.

It has required a peculiar kind of vision, courage, bloody-mindedness and a fair dollop of sheer luck – but they’ve nailed it. Their success is well-deserved and widely recognised. But where are the other shadow-huggers when we need them?

If quality local marketing ideas can be judged by the length of time that the concept lingers in your head, then they seem to be few and far between nowadays. Havelock staged their annual Mussel Festival on Saturday. I’m not sure if they took any advice from Hokitika or Ross, but they could do a lot worse.

Embracing the hacker way

Late in 1984, Irish rock group U2 released its experimental album The Unforgettable Fire and started a world tour to promote it.

The first show was at the Christchurch Town Hall in August, so some mates and I bunked school and hitch-hiked up from Timaru to catch what was then considered an “alternative” rock act.

Frontman and vocalist Bono Vox absolutely owned the stage, building the crowd into a frenzy, then gently calming them down. Bono ended the encore with 40, U2’s own interpretation of the 40th Psalm – a chantingly melodic song, guaranteed to soothe the most savage breast.

I remember thinking that the mullet-topped Irishman was a pretty canny individual, carefully planning his set list to discharge a chilled and well-behaved crowd of 5000 out onto Kilmore and Colombo streets.

Twenty-eight years later it appears he’s still canny. As a result of Facebook’s forthcoming Initial Public Offer (IPO), Bono will become a billionaire, owning 1.5 per cent of the social network.

In 2009 Bono, though his private capital vehicle Elevation Partners, bought his share for US$90 million ($108m), a decision that will make him the world’s richest rock star. He’ll be joined by Facebook backers and senior managers who will also become instant billionaires.

The list also includes Peter Thiel, the man who is quoted as describing New Zealand as an investment “utopia”, and supporting that belief with his chequebook, buying solid whacks of online accounting provider Xero and internet cable provider Pacific Fibre. Assuming the float proceeds, Thiel’s 2.5 per cent will value up at around $2.8b, and join returns he made from PayPal, the company he co-founded and sold to eBay.

As part of Facebook’s IPO announcement, founder Mark Zuckerberg tabled a letter to potential shareholders. Some of the letter contains PR baloney like “we don’t build services to make money” and “Facebook was built to achieve a social mission”: these sentiments seem so much at odds with public attitudes to the social media giant and they fail to resonate.

However, within this self-aggrandisement there is some good oil, particularly a section called The Hacker Way.

Rather than anything to do with breaking into computers, hacking according to Zuckerberg just means building something quickly or testing the boundaries. It’s a belief that something can always be better, and that nothing is ever complete.

Hackers try to build the best services over the long term by quickly releasing in increments rather than trying to get everything right, all at once.

Ad Feedback Zuckerberg also references two in-house philosophies: “Done is better than perfect” and “Code wins”. The first is a reference to the import of learning through small iterations rather than big rollouts. The second refers to the value given to live computer code, rather than days of debating about theoretical programmes. In other words, the value of software and actual experience, rather than air-ware and endless meetings. It’s meritocracy at its simplest.

If you look at some of the good stuff that New Zealand business has delivered over the last year, you’ll find The Hacker Way has been used to good effect. Rod Drury used it at Aftermail, the company he founded in 2003 which took everyday email content and morphed it into a relational database, unlocking considerable value along the way. Rather than focus on reasons you might not be able to do something, Rod worked out what his team could do, all on the smell of an oily rag.

Jeremy Moon embraced The Hacker Way in lugging his first generation Icebreakers around North America, literally sticking his foot in the door of stores, then focusing on any product disconnects and quickly turning around Icebreaker versions 2.0 and 3.0 in double quick time.

The guys at Wellington-based Set QR also displayed The Hacker Way in taking something generic and kissing it with brand. QR codes are the small square digital boxes which a smartphone will scan and then send you to a website. Set QR hijacked these generic boxes and overlaid a designer brand that makes them instantly recognisable, even without a scan.

Standing against this growing number of entrepreneurs and start-ups employing The Hacker Way, are the majority of large organisations – both public and private – who don’t or can’t. The New Zealand Government invests $2b a year in technology, while private sector investment is probably several times this. And to date, The Hacker Way isn’t that common among these heavyweights of Kiwi technology spend.

Perhaps one unlikely but useful outcome of the Facebook share bonanza is that more local companies will be motivated to understand the principles of The Hacker Way rather than seeking to boil the ocean with their technology projects.

The question is whether our tech spenders accept the challenge that Bono sang about in the Christchurch Town Hall and “Sing, sing a new song”.

Humour and truth – the only real currencies

While the American preacher Harold Camping, who predicted the world would end in May, was mistaken it’s hard not to notice the huge number of natural disasters hitting mother earth.

From the Japanese tsunami, through to the Chilean volcano and increase in tornadoes, it’s been a frightening few months.

Two weeks ago my Wellington- to-Sydney flight got re-routed through Christchurch to avoid the Chilean ash. Just as we were coming in to land, the pilot pulled out as a result of the 5.0 earthquake.

Fifteen minutes later he got the all-clear to land, meaning I was in Christchurch for the 6.3 shake that happened soon after.

Like most Wellingtonians I’ve had a sort of misplaced guilt about Canterbury’s shakes. Having now experienced a glimpse of what it’s like to be in a decent shake, my guilt has turned to self-centred appreciation that my family aren’t going through what thousands of Christchurch families do on a regular basis.

There’s nothing like the smell of one’s own mortality to focus the mind.

A natural disaster may also have started to affect Mark Zuckerberg’s Facebook empire. The seemingly unstoppable social media behemoth has just suffered its first month of negative American growth in May.

According to Inside Facebook, the social network lost six million users in the US, 1.5 million in Canada and 300,000 across Britain, Norway and Russia. Total users were still up 1.7 per cent but a loss of almost 8 million in core territories is a mite queer, especially after a sluggish April.

Whether it’s the cavalier attitude to privacy, their misguided plot to defile Google’s reputation or Zuckerberg’s exceptional ability to annoy the heck out of people, it’s noteworthy. Locally Facebook is still strong, overtaking every other social media site to make up 79 per cent of all New Zealand social media activity in 2010, according to Nielsen Online; it also has similar social media dominance in Australia.

The Australian Defence Force recently got a damn good lesson in how not to handle social media when a recruit secretly filmed sex romps with other recruits and aired it via social media.

The result was widespread condemnation by everyone from Prime Minister Julia Gillard through to the Defence Minister Stephen Smith who commissioned a review of the Defence Force’s social media policy. In announcing the review Mr Smith promised it would “harness opportunities to improve Defence’s work and reputation”.

It was at this stage that things got seriously unstuck. Sydney- based hipsters George Patterson Y&R Advertising was chosen to conduct the review, a firm that positioned themselves as “digital social” experts. When the Australian news media took a cursory look at this firm whose mandate was to sanitise the Defence Force’s laundry, they found a steamy pile of clangers dropped by George Patterson Y&R’s own social media team.

On the company’s Facebook page, and their own sites and profiles accessible from the advertising company’s homepage, were a sobering collection of colourful posts; ranging from some describing Julia Gillard as a lesbian and Kevin Rudd a loser, through to links to acceptable stalking and how to make your own sex toys. Remarkably, the bulk of the offending was conducted by members of the firm’s social media team, likely to be the very people who would be advising Defence.

Herein lies the challenge of social media. The only two commodities with any serious currency in social media are truth and humour. Both are extremely contextual, and thrive on intimacy. If you take either out of context or transpose them into a formal environment they can bite you on the bum.

To many it was further evidence that on the internet you really can’t control what is said about you. To others it was a convincing argument for the need for more control. Whichever camp you fall into, social media and the web more broadly is inspiring in that you don’t need to ask permission to make a tweet, to throw up a hyperlink, or make a complete dork of yourself and your brand.

When the father of internet jurisprudence Larry Lessig reviewed the movie The Social Network, his main beef was that the film failed to get the message across that the key enabler to Mr Zuckerberg’s success was the free and unfettered nature of the online distribution platform.

To Mr Lessig this defining characteristic of the net is under threat. His research (as a professor of Law at Harvard and founder of Creative Commons) has led him to the belief that policymakers and old world powers are collaborating to bargain away net neutrality in favour of regulation through software coding. In his book Code 2.0, Mr Lessig argues that rather than the net being uncontrollable, it allows more regulation than is possible in an offline world.

This week Mr Lessig is in New Zealand for the first time, delivering the key note presentation at Internet New Zealand’s Nethui. For more information check out http://www.nethui.org.nz

Bob brings it all back home for retailers

Bob Dylan by Alberton Cabello Via Wikipedia

Next week is Bob Dylan’s birthday. Born Robert Zimmerman, this chronicler of 1960s social change changed his name to Dylan after being influenced by Welsh poet Dylan Thomas.
While opinions differ around the musical integrity of his later work, his first few albums came out of nowhere with a sound so different, and lyrics so innocently cutting, that they became the anthem for civil disobedience and social change.

While most agree his 1965 album “Highway 61 Revisited” is the best, the previous record “Bringing it all back home” is my favourite. And I reckon the opening track “Subterranean Homesick Blues” is pretty near perfect.

Amongst the plethora of eclectic references in the song is the line “You don’t need a weatherman, to know which way the wind blows.” While he wrote it as an empowering line for angry young men and women abandoning the social and political paradigms of their parents, it’s also salient advice for retailers trying to future proof their business.

The latest retail shopping study from Nielson Online shows that almost half of all New Zealanders adults are now shopping online. Almost 1.5 million New Zealanders aged over 18 bought stuff online in 2010. While only seven per cent ahead of 2009, it was effectively double the figure of six years ago. (see  http://nz.nielsen.com/news/documents/NielsenNewZealandOnlineRetailReportFINAL_TB1.pdf)

Not only is the percentage of local online customers increasing, so is the amount of things they are buying with the number of people purchasing four or more items increasing 25 per cent over the last year. So to take Dylan’s advice to heart, if you are retailing and want to future proof your business you are likely to be a mug if you haven’t at least started to migrate your business to online.

For some it’s an easy decision. If you have a limited range of products, physically disparate customers, an electronic database and transparent pricing, then moving to an online ordering and payment system is pretty much a no-brainer. However for others with huge inventories, poor stock management systems and customised pricing, it’s a nightmare.

One of the classic traps to fall into is the assumption that once you build a website for your business that customers will automatically go there. I’ve lost count of the number of websites I’ve seen companies build for large amounts of money, only to sit and wither. Big companies can afford websites which are effectively just a digital laurel wreath placed on the steps of corporate ego. Small companies have no such ability.

So a core question any widget-seller should ask themselves is whether they have strong enough brand, decent enough customer data and big enough marketing spend to attract sufficient traffic. A much cheaper option is to go where the existing traffic is, namely online portals and marketplaces, and sell your product on their platform. The downside of this is that your products will be listed alongside your competitors, so prepare to compete on price.

Assuming that you reckon you can get enough traffic to your website, the key question is how to put together your customer proposition. Oddly enough the traditional marketing notion of “the four Ps” – product, promotion, price and place – are a pretty useful place to start, particularly the first three.

In most cases it makes no sense to try and replicate all your offline products online. Instead focus on products that are easy to ship and unique enough not to have direct competitors at The Warehouse or Ebay. In addition to offering your regular products online, it may be that you can source particular lines at good prices, then offer these as online targetted specials. The beauty of this is that you can offer prices lower than you would in your store.

In terms of price it’s offline suicide to offer identical products online for less than you can buy them in your store. However to enable a level playing field consider offering free postage to mean the actual “in hand” price is the same. If you want to discount, then do it with the online-only specials outlined above, where you can tweak the elasticity between pricing, demand and revenue.

Lastly, when it comes to promotion there’s the holy trinity of search engine optimisation (so you appear on organic results), search engine market (so you show on paid results) and social media (so you show harness the strength of human networks). And don’t forget stunning customer service. Amazon in the United States and ASOS in the UK have immediate shipping and slick return policies, which results in powerful word-of-mouth promotion.

Beyond this the smart money is on marketing to your existing and new customers electronically. This typically takes the form of an electronic direct mail or EDM, but more recently it’s extended to the new generation of daily deal websites.

In a world where power has passed from the corporate to the consumer, retailers are foolish not to avail themselves of the same distribution network that their new global competitors use. As Dylan has also noted “you better start swimming or you’ll sink like a stone, for the times they are a-changing”.