Amsterdam, May 20--The collapse of Boo.com, one of Europe's highest profile Internet startups, has reminded me yet again that the concept of "fast branding," floated and ridiculed in this space a few columns back, is marketing's version of the Love Bug. This idea--this marketing "meme," if you will--is malicious and destructive; its viral spread is costing investors untold billions; it is destroying what little credibility advertising has in the public and professional mind. And worse, it's a concept that refuses to die.
The Boo bankruptcy was all over business class this week. I read about it above London, over Munich and in a holding pattern high above the Netherlands. The company, launched only last year, was to be a global e-tailer of fashionable sportswear. Its investors included the creme de la creme of the Continent's luxury companies and executives, among them Bernard Arnault of LVMH and the Benetton family. Its photogenic founders, Ernst Malmsten and Kajsa Leander (both Swedes, she a former model), were given a cover of Fortune (one of several mainstream publications whose revenues have soared thanks to Internet advertising). The typically uncritical cover line touted Boo as one of the "cool companies" of 1999.
Boo was aided and abetted in its rise by J.P. Morgan, Goldman Sachs and the Boston Consulting Group, whose book, "Blown to Bits," has become a sort of Bhagavad Gita of e-business. Unfortunately, it was Boo and its backers that were obliterated. Some of the reasons should have been obvious--at least if any adults had been home supervising: inexperienced management, a ludicrous business plan that called for a simultaneous launch in some 18 countries, consequent and lengthy startup delays, a ridiculously overstuffed and overpaid staff, high prices, a product line heavy on considered purchase items that consumers like to try on in stores. Oh, and a burn rate that makes the "Friends" cast salaries look like a bargain. At its end, Boo was spending about $1 million a week--a total of $135 million since its inception.
But what really caught my eye was something one unnamed investor told the Financial Times about Boo's enormous spending on, among other items, marketing. "If you look at Boo in concept as a potentially global company," this investor said, "then spending $100 million building it is not necessarily a lot of money."
There it is again: fast branding. The assumption that advertising volume translates, through some miraculous, ineluctable process, into revenues, then into good will, and then, mirabile dictu!, into profits.
Now, one can easily see how a Luciano Benetton--who dropped hundreds of millions of dollars on his company's worthless shock campaign before defenestrating its bombastic creator, Oliviero Toscani--could fall for such nonsense. But you'd think an investor such as Bernard Arnault, whose brand portfolio includes Louis Vuitton and Moet & Chandon, might have seen the flaws. Yet the Internet has caused otherwise expert brand marketers to lose their senses, like middle-age men confronted by a 19-year-old blonde. Both have unrealistic expectations about how quickly--if at all--an impression can be made.
Let's settle it once and for all. Here's why "fast branding"--and the avalanche of Internet advertising supporting it--makes no sense:
nWhen it's happened in the past (consider Apple's Macintosh), there has already been a committed user base that can validate the advertising proposition, spreading it through what today is called "viral marketing" but in the old days was known as "word of mouth."
nIf a company itself is new, successful, big brand-launch campaigns are usually touting a product or a service offering a distinctive value proposition. That's why we still associate low-cost air travel with Freddie Laker, some 20 years after his rise and fall.
nA large-scale advertising campaign, at its best, can really do one thing: induce trial. And trial is not branding. It's only a single sale--and these days it's being made at an enormous cost.
The accelerated pace of the Boo story is noteworthy. It took American e-businesses some four years to go from flicker to flourish to flameout. Boo traversed that entire path in less than a year. Its failure is already leading to a collapse in Europe's versions of the Nasdaq--Germany's Neuer Markt, the Nouveau Marche in Paris and London's Techmark 100 index. Paradoxically, that's good news for Europe. Businesses here will now get over this "fast-branding" hokum more quickly than we did.
Mr. Rothenberg can be reached at [email protected]
Copyright May 2000, Crain Communications Inc.