loongtao

Because you can't handle the truth. We live in an odd world these days, and no day goes by without something contradictory happening. Or double standards occurring. The sheer lunacy of it all. Pointed out to you by yours truly. Enter the LoongTao!

Tuesday, January 31, 2006

Ad Court Is In Session

(Disclaimer: While all of my past posts have been brutal, because it was always cut & dry, this one is a little different. It deals with the explosion of the internet and it's effect on how businesses do business, and how they are viewed. I've heard both sides, and have dropped the hammer. You may disagree, but I've already heard the arguments, and disagree with yours, as well. That's what it's all about. Just like I know my word is not law (only Chuck Norris has that distinction), it also means your word is not law either. And to assume it is, well, you're barking up the wrong tree. If you are so close-minded as to think yours is correct, unchallenged, almighty bottomline truth, you've lost touch. You've forgotten the freedom of opposing views when it comes to issues that are controversial, that subside in the grey area, something that was once something, but now could be viewed as something else, while still retaining that original something. Keep in mind, the first paragraph was my only topic, which opened up a Pandora's Box, which you'll see what follows immediately after.

Ever wonder why theaters tell you you can't bring in outside food? Sure, they tell you it's because they sell food there, too. Now, I guess you could argue that while yes, they have a point, but technically-speaking, their concessions aren't their primary business; the movie itself is. They sell concessions to make money. Is that there business? No. Yes, they're in business to make money. But they didn't open a concession stand. They opened a theater. Somewhere along the way, the movie studios gained more clout, and commanded more from the box office. The theaters lost money. Now, I'm not sure if they started selling concessions as a way to compensate for the lost revenue to the studios, or as an incentive to the movie-goer to patronize their establishment. But the bottom line here is that their business is movies, and the concession sales help finance the theater.

Now I've talked with several people on this, who seem to disagree. If you take McDonald's food into a Carl's Jr., yes, you can't do that, because Carl's Jr. is in the business of selling food, and McDonald's is a competitor. I was given an example of Google. Some say Google's business is as a search engine. Some say it is an advertising company. I could take the high road and say it all depends on what business you're talking about. But that wouldn't be me. From what I've heard, it all depends on who's doing the talking. If you're all about the money, and it's all about the dollar, I can see how every damn company out there could be considered an advertising company, so to speak. That's tunnelvision, my friends.

Google's product/service is a search engine, yes. They sell advertising, yes. No, they don't sell the search engine aspect. It is free to the consumer. This is why they have to sell advertising. This doesn't make them advertisers. The ones advertising are the advertisers. They provide a free service but as a secondary business, which is required to survive, is the selling of advertising. If their business is advertising, who's maintaining the site?

Another analogy used was the television industry. Good example. TV shows are produced. High ratings get high dollars for the ads during those shows. Low ratings cause less income and the shows are cancelled. But I doubt that's what it was all about in the beginning when they started.

The truth is, all of these industries' businesses are the the product/service they provide. Unfortunately, depending on that product or service, they need revenue to support it, so advertising is implemented. Somewhere down the line people have gotten greedy, and, subsequently, have decided to do it backwards with one thing in mind: money. So, the goal here is to make money but you have to figure out a product or service to provide for which to sell advertising, because advertising is the way you want to make your money. In that particular case, then yes, your business is advertising. Or is it? If your business is advertising, who and where are you advertising? See? You're selling advertising but your business is your product or service.

For all those out there that think Google wanted to derive their income from ad revenue and created a search engine to do it, fine. I think you're in the minority. I think they created a search engine because they thought they could create a better search engine, and were technically more savvy in what they were doing, and had some nifty extras attached to make them stand out. But to do so, they needed revenue. Enter advertising. It's a given in the internet world we now live in.

Here's another example: wrestling. WWE was cancelled off of Spike TV. At the time, WWE sold their own advertising. Now they're on USA. But USA sells their own advertising, so WWE lost 10 million in annual ad revenue. So what do they do, they step up production on their website, and advertise their site during televised broadcasts to increase site viewership Viewership increased, which brought in more ad revenue. So, while yes, their goal was to increase income from advertising to compensate for the loss by switching to USA, there business is still wrestling.
Overall, I think those who subscribe to the ad theory have lost track of the true meaning of the word business, and have allowed the almighty dollar to cloud their judgement as what we do as a business and what we do to support that business. Of course, one could blame the internet for changing how businesses are viewed. Is their business their product/service, or advertising, simply because there income comes from advertising? I think now, with the change in atmosphere and environment brought on by the internet, when you ask a company what their business is, they will have to cover both bases; "my business is air guitar, but my income is derived from advertising."

See what I mean?

There IS a difference.

I rest my case.

5 Comments:

At 5:58 AM, Anonymous Anonymous said...

All Chuck Norris, all the time!

 
At 1:53 PM, Blogger Discfree.com said...

I think that your article needs to better define what a business is. You claim that people who focus on the money have lost the true meaning of the word business, but I think that you are the one who doesn't understand what the true meaning of business is. Your post is confusing the services that businesses provide with the underlying structure that a business represents. By it's very nature a business requires a couple of things. It requires a good or a service and it requires a barter transaction to take place. If these two features don't exist, then it wouldn't be considered a business, it would be considered an orgainization or a profession. Blogging is a great example. Journalists are not in the business of selling ads, but you can bet that newspapers are.

You use the example of WWE being in the business of wrestling. This is not the case and it's naive to think that this is why they exist. They exist to make money. Vince would never have never taken the company public if he wasn't interested in making money. What's interesting is your own admission that the WWE is in the business of wrestling, but would you also argue that the Olympics are in the business of wrestling? I don't see how you could. The Olympics, while entertaining, are really a global contest, not an entertainment business. Take for example, the San Francisco Ballet. Would you say that they are in the business of dancing? Absolutely not, they are a non-profit organization that exists to promote the arts. They aren't in any business, since they are not allowed to be profitable. Wrestling is really no different then then any non profit, except that they are in the business of making money. This can come from many things, but to ignore the profit motivations of these companies is a dangerous route to take.

The same is true for Google. They are not a search business, but rather an advertising business that uses search to attract viewers. If Google wasn't interested in the advertising business, then they wouldn't be working on a server farm to host TV commericials nor would they have recently purchased radio ad time to sell to their customers (the advertisers). They also wouldn't need to maintain the fat profit margins that they get. Yesterday Google reported that they over just the last 3 months, they made a profit of $459 million dollars. If they are only interested in search, they would sell minimal ads instead of making massive amounts of money.

This isn't to suggest that there is anything wrong with companies who are trying to make money. Money is why people wrestle and why businesses have an incentive to show it to us. What I do suggest though is that there is a clear difference between the services being provided and the "business" that a company is involved in.

Herein lies my disagreement with your original post that movie theaters should allow outside food because they are not in the food "business." Having worked on the accounting for numerous movie theater chains, I can tell you that the theaters receive very little from the movie studios. Revenue sharing is typically 80% to the studios, only after a movie has run for two weeks. What this means is that while movie theaters might provide the service of entertainment, their real underlying business is concession sales which subsidizes their ability to pay rent, hire employees and promote their brand. Without these concession sales the movie theater industry would quickly succumb to bankruptcy because the movie studios (who are in the business of movies) are keeping most of the money for themselves. When you bring outside food into the movie theater you are paying for the money, but you are forcing others to subsidize the cost of providing the movie experience.

Overall, I think that you highlight an important issue. That the goal of the consumer and the goal of a business are often very different. Without movies, people wouldn't go to the theaters and subsequently buy popcorn. Without search, Google wouldn't get traffic to sell ads to. But without advertising/concession sales we would never see these services.

 
At 3:54 PM, Blogger Dan LaFever said...

I'm talking apples and you're talking oranges.
1 – everyone is in business to make money
WWE’s business, which I define as a product or service, IS wrestling. Of course, he wants to make money. Everyone does. But you have to create a business in order to make money, and that means coming up with a product or service. How you make money, whether it’s selling that product or service, or selling advertising to finance that product or service, is not the business, it’s what you are in business for. There’s a distinct difference. It’s in the wording.

2 – I would never say the Olympics’ business is wrestling, and I never did.

3 - You're right about the the ballet. But WWE is different altogether.

I stopped reading after Google because it’s clear your definition of business TO YOU is simply money. Every company out there’s business is money? If someone asks you what your business is, would you say money? I think you would, and you'd be missing the point. I fail to see the logic. As I stated above, your business is WHAT YOU DO, money is WHY YOU DO IT.

WWE’s business is wrestling, and they are in the wrestling business to make money. Simple as that. If you don’t agree, you’re missing my point. I think I stated it fairly clear and specific, but unfortunately, you’re only concerned with the money aspect.

 
At 4:18 PM, Blogger Dan LaFever said...

Besides, I challenge anyone to look up the word business in a dictionary, which states, activity, trade, occupation, etc. Nowhere does it say making money. You have to do something to make money. And that something is your business.

So I stand by my original stance that a movie theater's business, primarily speaking, is movies. They do make some money at the box office, and yes, the majority of money comes from, and the reason they stay in business, is concessions. So one could argue they are in ALSO in the business of concessions. This was my original point.

 
At 9:33 AM, Anonymous Anonymous said...

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