Davos ponders Net branding and sees 'com' before the storm

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Davos, Switzerland--As I was exiting the vaulted restaurant at one of the finer hotels in this Alpine ski resort, the chief executive of a Kuwaiti dairy company tapped me on the arm and said, "You know, I don't think they answered your question. I think they are in denial."

"They" were some of the most senior executives at companies controlling 80% of the world's gross domestic output -- assembled for the World Economic Forum, an annual fete bringing together 2,500 of the business, political and media elite for so much buttonholing and conversation that even the Financial Times felt compelled to use the word "schmooze" to describe the event's favorite activity. And "they" -- more than a few of them -- were in denial about brands and the Internet.

Not that their ignorance was willful. Indeed, this was the year Davos went "e." The several-score interactive kiosks on which heads of state and CEOs could email each other were humming with activity day and night. The first sessions to fill up and close were those featuring Merrill Lynch's Internet doyenne, Mary Meeker. To induce attendance at corporate press conferences, Palm Pilots were handed out like candy.

Branding, too, was among the five-day event's motifs. At a dinner on global branding, my table included the heads of McDonald's, General Mills and Maytag, and the conversation throbbed with talk about agencies and imagery. A horde of global luminaries packed a 7 a.m. breakfast to hear the warning, "You're one click away from losing a customer."

But the true impact of interactivity on brands and branding still appears to elude even some charged with stewarding the world's great franchises.

The "one click" breakfast was a signal example. In one of the more cogent explanations I've yet heard about the Internet's impact on brand development, Yossi Vardi, founder of the Israeli company ICQ, listed the five linked factors transforming branding: broadband, wireless, the "always on experience," the "immense power of user-to-user recommendation" and clicks-and-mortar development.

Mr. Vardi, whose revolutionary software allows users to find and message each other in real time wherever they happen to be on the Web (and whose company AOL bought for some $100 million), explained that, together, these phenomena are driving the cost of customer acquisition -- upwards of $50 per via direct mail -- down to zero as users employ the newly ubiquitous technologies to induce friends, then friends of friends, then friends' friends' friends to try new technologies, services and products.

"So when I see New York City covered by dot-com billboards," Mr. Vardi concluded, "I say, `What a celebration of the old media! What a waste of money!'"

As prescient as Mr. Vardi was, though, others still insisted mass media's role remains secure. That was the reaction to a question I asked, in various iterations, at several branding sessions.

Some lauded the use of TV-to-Web cross-platform strategies; they were unwilling to contemplate the day when TV advertising no longer has enough of an audience to serve as a launch pad to the Net. Old brands can remain very vital in the New Media environment, others affirmed; how companies might go about creating new brands in a place where the retail and media shelves are infinite was greeted with little more than a shoulder shrug.

David Aaker was among the few at Davos to confront the conundrum head on. A Berkeley marketing professor, expert on global marketing and author of the soon-to-be-published "Brand Leadership," Prof. Aaker believes mainstream advertising's utility is inexorably eroding. The evidence lies with those brands built without it. "The best brands built on the Web haven't really relied on media advertising," he told me. "The most successful Web brands have relied on visual imagery and personality, as [the search engine] Ask Jeeves has. Or they do out-of-home promotions. Big Words, the online textbook service, hires kids to run around campuses in yellow jumpsuits, which have become their symbol."

So why, I asked Prof. Aaker, have even dot-coms assaulted the airwaves with inane, expensive spots? "Because they're started by financial people, and the last person they hire is a marketing guy," he answered. "And by the time the marketing guy is there, there's no time left, and he's told, `Go hire an agency and spend $15 million to build a brand quick.'"

"What a recipe," Prof. Aaker lamented, "for mediocrity."

Copyright March 2000, Crain Communications Inc.

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