Annual reports meet the era of the dot-coms

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Every day we hear online companies are spending millions on advertising -- certainly more than their profits, and often in traditional media. In fact, total media expenditures by online advertisers in 1999 reached nearly $2 billion.

But this article is not about cost/benefits calculations. Nor is it about rational decisions. It's not even about whether companies or their venture cap firms understand advertising. And you can forget about an agency windfall or collection problem essay.

This is about the next new thing -- annual reports from publicly owned dot-coms.


Last year saw 546 new companies go public, so 2000 will be their first annual report. With a record $69.2 billion raised, you can be sure we're going to enjoy a wealth of creatively themed millennium moments to properly position and brand this new generation of corporations.

Given the desire to build brand-name recognition almost over-night, and the competitive desire to outdo the next guy on advertising, options and market cap, venture capitalists and graphic designers will probably drive the importance of dot-coms' annual reports to the highest levels seen in a long time. Maybe ever.

After all, spending $200,000 for an annual report, which is a very healthy but realistic number, pales against a $10 million advertising campaign and is invisible when compared to the money left on the table when companies go public at $20 and their stocks zoom to $200 in a single day.

Certainly, there have been times when annual reports were a real flagship statement about a company, its products and management. The primary purpose of those old 50-page, four-color perfect bound beauties was to wow investors. Back in the good old days, when everybody used to say that the '90s were different from the '80s and not about material things, enterprising investor relations executives created the frugal-looking "10K wrap," and for most of the '90s it worked well.

It's not as if investors complained that a company spent too little when it wrapped a nice cover around the tedious annual document filed with the Securities & Exchange Commission. Excluding designers and printers, many people thought those wraps were just fine.


Many reports will be rushed to investors with the same first-to-market mentality that propelled the launch of their companies only the year before. Others will be collector's items because they are either the first or the once-and-only. Christie's may auction them as Americana some day, with future bids reaching current market cap levels if inflation ever comes back.

Paper manufacturing may be the next growth industry -- at least until the SEC allows reports to be e-mailed to shareholders.

Here are 10 suggestions for this spring's bumper crop of annual reports:

* Be different and avoid a new millennium/new century theme.

* Keep the cost of the annual report below the cost of the fees you pay your investor relations agency for a whole year's work.

* Avoid a century's worth of boring boardroom pictures, head shots and artsy assembly line close-ups.

* Don't believe your company's image is based on displaying senior executives tie-less and wearing jeans in the pictures. At the same time, suits and facial hair will not make 25-year-olds look older.

* Use a serious tone and deliver a sensible explanation when describing your stock's 500% run up in the past year.

* When discussing the lack of earnings, try to do better than simply saying it's a new business model and explain where real profitability is going to come from and when.

* Manage expectations for next year when the stock price might only rise a measly 30%.

* Consider a glossary of terms (e.g., "VCs" and "angels," "eyeballs" and "click-throughs," "B-2-B" and "C-2-C," etc.).

* Showcase your annual report and your annual meeting on your Web site. When the SEC will allow these online instead of the real thing, you'll be ready.

* Offer discounts to shareholders who order your products online or provide direct purchase of stock (no commissions) to customers as a motivator to become shareholders.

And don't fret about the extra costs of these ideas. There's probably a new business model to cover them, too.


And a final observation, with a tip of the hat to comedian Steve Martin, who recently noted that the third millennium starts with the number two: The first annual reports produced in the year 2000 will be dated for the period their fiscal year ends -- 1999.

Somehow, it seems a good prediction that companies will figure out how to graphically and thematically get that 2000 on the cover anyway.M

Mr. Schwartz is president, G.S. Schwartz & Co., New York, a public and investor relations agency.

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