Thursday, October 25, 2007

Forget borders online!

A version of this piece was published in Marketing in 2007

For some years now, the Guardian’s website has attracted more readers in the US than the paper does in the UK.  Last week, Guardian Media Group announced the launch of Guardian America – a website designed to tap into what the company sees as a vast unmet need for liberal-framed news and views in the US.

The Guardian is the first newspaper outside of the financial press to go international through the web, and in doing so, it’s making use of one of the fundamental effects of the move to online business – the irrelevance of distance.

From the web’s early days, observers predicted that the medium’s distain for geography and borders would open up new markets for businesses.  Any business whose product is essentially information would benefit quickly, they argued, and even businesses with physical products to distribute could benefit from the reduction in economic friction that resulted from the ease of informing potential customers of their availability.

But the reality has been slow to catch up with the potential.

This is largely because the web poses significant organisational challenges for businesses in several dimensions. 

Between disciplines, the web raises the bar for co-operation between operations, marketing, finance and management.  Failure of operations to deliver on marketing claims can be given wide exposure by consumers, the shift of marketing spend to being a cost of sale can challenge long-established budgeting practices.  And for all, the speed of competitive change can strain processes as the business cycle accelerates.

Within the disciplines it exposes discrepancies and unaligned practice – differential pricing can become visible to consumers, contradictory offers become apparent – and always risking the full glare of public attention.

But it’s internationally that some of the toughest obstacles lie.  Historic power bases guard their autonomy jealously, and tension between local and central management is common. 

The web allows businesses to ride roughshod over these conventions – trading across borders, exploiting local opportunities and weaknesses and ignoring the established process.

Back in 1999, when web advertising was still in its infancy – just a £50m market in the UK – the demand for financial services advertising had rocketed, and as Christmas approached, rates had become uneconomic as more unsophisticated buyers piled in regardless.  In response, my agency moved its entire financial media buying into the US – targeting only surfers from the UK. 

US publishers seized this opportunity – this audience was regarded as wastage, as they couldn’t usually sell it – and we were able to deliver our volume objectives, at an 80% price discount against the UK market. 

This is something that would have been much harder in traditional media, but online buyers realised that in this medium they could view non-domestic media, manage and track their performance through adserving, and trade with them easily on the phone and email.

The prize for those prepared to throw away convention is potentially a rich one.

When Rupert Murdoch wanted to launch a TV service in the UK, he eschewed the high-tech, high-cost approach of the official licenced satellite TV company, BSB and simply rented capacity on an existing satellite, uplinking it from Luxembourg to avoid burdensome UK regulation.

Whilst his competitors stuck to outdated rules, he realised that technology had rendered the regulations irrelevant and used this knowledge to create the business we see today.

So the Guardian’s launch in the US is a logical move which exploits a new borderless media world – it’s an imaginative outbound venture to the biggest media market on the planet.  But whilst regulators in the EU debate the rules over media ownership here and across the continent, they might do well to remember that most of the traffic is going to come the other way.