In The Japan That Can Say No, a book never published outside that island country, co-authors Akio Morita (the late founder of SONY) and Shintaro Ishihara (ultra-conservative) compare the American economy to that of the Japanese. The difference, they say, is the foundations on which the two economies are based.
According to the authors, Japan is built on the manufacture of exportable products. The U.S. on the other hand – most Western countries, for that matter – have predominantly built their economies on the movement of currency: trading, mergers, acquisitions, etc.
But macro-economics doesn’t mean much to most people. So how about something more familiar, like broadcasters, or the internet?
In last month’s RealScreen, it was announced that News Corp. was planning to spend US$1 billion on Healtheon/WebMD, an online medical site. In this issue, Discovery has made known its intention to spend half a billion on its web efforts.
That’s a pretty big number – and it doesn’t add up. Try as hard as you can – be as extravagant as you want – there is absolutely no way you can spend half a billion dollars on websites. They’re just simply not that expensive. According to Andrew Wardle of Fireworks Creative in Toronto (see page 54), you can get yourself a pretty good website for $50,000.
Obviously, the vast majority of that money isn’t being spent on building websites. It’s being spent on marketing. In the case of the News Corp. deal, $700 million of that billion is earmarked for advertising.
All of this raises a few inevitable questions:
What product/service do you want to be involved with that needs three-quarters of a billion dollars worth of advertising to convince you that you really want it?
Is there any precedent in which a multi-national company has staked its future on such an uncertain outlet? (A half billion dollars is still a half billion dollars after all, and there is no present indicator to suggest that sort of money is coming back.)
And lastly, are we really living on a big playground? (i.e. `I can spend more online that you can…’ And yes, your mother does dress you funny.)
When the internet recession hits – and I guarantee you it will hit within the next two years – what happens to these companies? Morita and Shintaro provided a model in their book. Those countries/companies who have invested in tangibles will adapt, as they still have something to trade in. Those countries/companies who have staked their future in intangibles, however, will be much harder hit.
It’s that bird in the hand thing.
There’s a simple solution: spend half the money earmarked for advertising campaigns on production instead. Build broadcast and online libraries. Create content. It will still leave a massive marketing budget, but if everything goes south, there will still be all that programming, and that means a healthy, modern library and a durable brand.