When Finger Licking Good Meets the Urban Pothole

An oft-stated observation made in connection with the economic crisis is that companies, when confronted with cuts in R&D, marketing, and advertising, have chosen first to cut their advertising budget as a means to bring expenses more in line with projected income. I would tend to believe that the reason for this lies less in the fact that advertising is less significant to the economic well-being of the company than is R&D or marketing, but rather that advertising is more akin to a current expense. As such, the absolute amount expended in a given short-term period can be calibrated to the general level of economic activity that is taking place, more or less, at the moment.

That said, the economic exigencies of the moment do seem to generate create ways to seek maximum advertising bang for the corporate buck. A real curiosity in this direction was noted in a short item that appeared in the April 20th issue of Business Week. Entitled "A Chicken in Every Pot(hole)", the item described how the corporate parent of Kentucky Fried Chicken, Yum!, expended $3,000 to fund the repair of 350 potholes in Louisville, Kentucky (if my memory serves me, Louisville is the corporate headquarters of Yum!). On each pothole, there appeared a message--"Re-furbished by KFC." Keeping with the low cost nature of this advertising campaign, the chalk-based advertising fades within a month or so. The item went on to note that the campaign has been extended to other towns, including Warren, Ohio and Chattanooga, Tennessee (for all of you non-Americans, an atlas might be in order to locate these two smallish towns, both of which are interestingly located in states that are contiguous with Kentucky).

Said the KFC spokesperson: "We thought we could refresh the streets and try a new form of advertising." Retorting with a degree of skepticism, brand consultant Laura Ries queried as follows: "What does deep-fried chicken have to do with potholes." Unfortunately, the Business Week item fails to consider the question further, and one can ask whether the item was brought simply as a short curiosity intended merely to entertain the reader rather than to consider how companies can successfully advertise despite the challenging economic times.

Okay, even if Business Week declined to engage in a serious consideration of the underlying issue involved, I feel compelled, if for no other reason that professional and intellectual curiosity, to offer several comments.

First, while the pothole cum civic message is characterized as advertising in the news item, it seems to me that it is more of a hybrid of sponsorship and advertising. By this mean I mean that the use of the KFC mark is connected with an activity which Yum! presumably wants to be connected, rather than merely an ad directed towards creating custom at the nearest KFC eatery. The comment by Laura Ries not to the contrary, it would appear that Yum! finds the connection between the KFC mark and good citizenry to be an attractive combination.

A SPONSORSHIP OPPORTUNITY IN THE MAKING

Second, the economic downturn does not mean that all forms of sponsorship have been put on hold. True, the trend has been to cut sponsorship of events at the mega level (especially in sports). Here, to the contrary, a modest amount of advertising expense was committed to funding a specific type of short-term sponsorship with presumed benefit to the overall perception of the brand.

Third, the ad/sponsorship campaign (if it can be called that) is local in character. Louisville is a mid-sized town best known for the Kentucky Derby; Warren and Chattanooga are even smaller. Perhaps the message of good corporate citizenry is more easily delivered in these secondary or tertiary urban settings. (Don't get me wrong, I was born and raised in another such town only 30 miles from Warren and there is a lot going for this kind of environment).

Thus, precisely because a major brand might choose to forgo a nationwide sponsorship campaign invites local experimentation. I suspect that there are large urban centers in the U.S. that would have been delighted to have had their potholes repaired. Assuming that this is impracticable from a budget point of view as a form of sponsorship, one wonders what a large company might to in very large urban center to achieve the same effect as the KFC-sponsored pothole covers in Kentucky, Ohio and Tennessee.

THE NEWEST LAB FOR ADVERTISING EXPERIMENTATION?

Online Video: Has Hulu Found the Business Model?

Lest we forget, modern copyright is ultimately about monetization. Nowhere is this first principle more apparent than in the world of user-generated content, especially of the visual sort. YouTube may have zillions of viewers and a seemingly endless number of users willing to share visual content, but YouTube, and its owner Google, still struggle with how to turn YouTube from a social phenomenon into a viable business model. It is not surprising, therefore, that the search for how to monetize visual contents on the Internet goes on.

One notable attempt--Hulu--was reported last month in The Economist ("Hulu Who?", February 7th). The article can serve as an elegant primer for anyone interested in the complex matrix of considerations of how to turn content into profits in the online video world. According to the article, YouTube as a business suffers from three overarching problems: (i) Advertisers and brand holders are wary of being connected with user-generated content; (ii) the content is too variable and may turn off viewers in unpredictable way; and (iii) a sizable amount of the contents was illegal and has attracted law suits from media giants.

Based on these uncertainties new entrants, according to analyst Shadid Kahn, had to confront the following questions in fashioning their alternative to YouTube: (i) How much to rely on user-generated content as opposed to commercial content?; (ii) be an aggregator for numerous media providers, or focus on delivering the content for one provider?; (iii) distribute the contents via the user's computer to a user-held device, such as the IPod, or stream the contents; (iv) if streamed, is is better to do via a dedicated application on the user's computer, or to enable viewing inside the web browsers; and (v) charge viewers or rely on advertising?

User-generated contents: but will they still watch it tomorrow?

Enter Hulu in 2007 --a joint venture of NBC Universal and and News Corporation. Hulu, and particular, its CEO Jason Kilar, formerly of Apple. Already in December 2008, 216 million videos were viewed, advertising is fully subscribed, and the impression (unverified) is that Hulu is generating revenues in a way that point to a viable business model.

So what is the Hulu business model? There are at least four basic elements: (i) Eschew user-generated contents and use only professional content: (ii) aggregate content from many sources, despite the fact that the two partners is each a content provider on its own (Universal and Fox); (iii) streaming through the browser rather than downloading to the user's computer by means of special applications software; and (iv) rely on advertising rather than charging users for downloads.

I said Hulu, not Hula

So will Hulu win out? Prophesy is beyond the ken of this blog, but we would note the following. there are substantial competitors to Hulu, such as Apple and TV.com, a streaming service owned by CBS, and there is no doubt that others will surface. It is possible that there is room for more than entrant, each of which provides a somewhat different mix reaching its own distinctive audience. Hulu may itself modify its model to reach out further (already there is talk of enabling downloads which will be funded by user fees rather than advertising revenues). Moreover, in the short term, at least, the appetite for advertising may soften in the face of deteriorating economic circumstances. From the business point of view, it will be fascinating to see how all of this plays out.

One final comment is in order. The Economist report mused that the decision to stream via the user's browser was perhaps the most crucial decision in accounting for Hulu's early success (particularly in that allegedly left rival Joost, who charged for user downloads, far back in the pack). But being an IP person, I believe that the decision to rely on professional content is no less important. Copyright may be, as we never fail to tell our students, the most democratic and omnipresent of IP rights, but mass itself is neither necessary nor sufficient for commercial success.

Like it or not, even the most repulsive example of reality show contents is the handicraft of content professionals, while capturing one's cat on video, engaged in some momentarily eye-catching antic, is not. Not every professional content will presage commercial success, but it seems more likely to be a prerequisite (necessary, but not sufficient, if you like). I do not think that the online video world will prove to be any different.

Even cats like Reality TV