News Corporation's brand architecture defenses under siege

The phone hacking scandal at News Corp.'s The News of the World is testing the effectiveness of brand architecture as a way to protect a company from conflagration when one of its units burns to the ground.

The protective possibilities of brand architecture is an argument in favor of a "house of brands" model, a model where a company's products and services are all separately branded like Tide, Crest and Gillette for Procter & Gamble. The idea being that since consumers don't know that these separate brands are all part of the same company, then problems encountered by one brand won't affect the reputation of the others.

When BP, for example, was being pilloried for the Gulf oil spill, its Arco business benefited from the fact it's a separate and unconnected brand. Whereas all of Accenture, as a single company brand, was impacted by its association with Tiger Woods when his excesses came to light. Bank of America might now be wishing that it had kept its Countrywide Financial acquisition as a separate brand until all of its problems were sorted out because, as it is, the Bank of America brand is being tarnished.

News Corp. is a veritable Spelling manor, house of brands; As the world's second-largest media conglomerate and an aggressive acquirer, it has a huge number of papers, magazines, book publishers, movie studios and assets in TV broadcasting, cable and satellite. In addition to The News of the World, these include many well-known brands like Fox, The Wall Street Journal, The Times and Harper Collins.

So, the theory is that the problems at The News of the World should not affect the rest of the organization. But the facts suggest that this theory is not working. Just one measure: News Corp's share price has fallen dramatically in the last couple of weeks wiping almost 20% off the value of the company by some estimates. So what's going on here? A couple of things have undermined the usually reliable house of brands architecture defense.

1) The story is now about Rupert Murdoch, not the paper. He was the one who became the center of attention (and the target of a pie-attack) as he testified at the UK parliamentary hearing. And one of the underlying stories about  Rupert Murdoch is how he built his media empire so that means that all the other assets he owns are now in play.

2) The problems at The News of the World have been portrayed as a pattern of questionable ethical behavior that's pervasive in the whole company. One example that's been cited is News America, the in-store and newspaper insert marketing business. News Corp. has been reported as paying out over $650 million to settle corporate espionage accusations against that company.

The House of Brands may provide some risk protection but there are limits. The News Corp. story shows that if a fire is big enough, it will jump from one brand to the rest, and a house of brands model will not be able to stop it.

Photo credit

A bad week for market leaders: Facebook, News Corp. and Netflix under attack

Even when you are a leader with a seemingly unassailable hold on your market, things can go horribly wrong, horribly fast if you ignore your customers or take your leadership for granted. Currently, three strong category leaders are suffering the consequences of certain amount of leadership arrogance that may leave them diminished, if not wrecked entirely. 

Facebook: Facebook has a long-standing, self-interested antipathy to its customers privacy concerns and has frequently changed its policies to try and get its users to be more open and hold less back from public view. Despite lots of grumbling, this had not had any measurable impact on their business. But now Google has used this source of irritation as its opportunity to break into the social media space. While Google's earlier efforts, Buzz and Wave, failed to get any traction, Google+ has attracted more than 10 million subscribers in record time (despite being invite-only). Its Circles feature, which allows users to categorize friends and only update to select groups, has captured people's imagination, differentiated Google+ from Facebook and given them a solid reason to try something new. (Almost half the people in a recent survey said that Circles was the feature that Facebook should be most afraid of.)

News Corp.: A lot of schadenfreude has been flowing as Rupert Murdoch's media empire has taken a battering after a phone hacking scandal centering on the UK's News of the World. In its determination to use any means (legal or not) to dig up the dirt and get a story that no-one else had, the paper showed a sense of entitlement that leaders are prone to develop. Now the company faces a firestorm that's out-of-control and which has already led to arrests, the closure of the News of the World and a 15% drop in News Corp.'s share price.

Netflix. Netflix has used up a significant amount of its reserves of consumer goodwill with the price increase it announced last week. For some customers (including me) this is a 60% increase for the same service. Anger has been high and even Wall Street Journal readers voted, by a 90%+ landslide, that this increase is a bad idea. It's a bad move, badly handled. Netflix has decided it needs to switch from a dvd-distribution model to a streaming model, a strategy that makes sense from a technology evolution perspective. But, trying to force people to change their behavior to conform to what the company wants with unjustifiable pricing and before the product is ready* reflects an arrogant, taking-things-for-granted attitude that tends to lead to consumer revolt. The one good thing that Netflix did was to forward date the increase to the end of September and provide some other pricing options that are not as egregious as the 60% increase. That will allow time for people's anger to subside so they can make a rationale choice not an emotional one. By then, perhaps less than the 41% of people who say that they are going to cancel will actually do it.  

* The streaming product selection is much less than the dvd selection and a lot of recent movies are not available.

Photo credit

Will Prius be the aol of green cars, Tesla the Webvan?

As I have crawled along the jammed-up freeway in Marin, watching hybrid after hybrid fly by me in the car pool lane (a privilege that's just ended), I would never have guessed that cars with green technology still only represent 2% of the U.S. market.

It may take a while for the rest of America to reach the level of green car penetration we have in Marin but the growth rate is impressive (twice as fast as conventional cars). J.D. Power estimates that, in the next five years, the number of hybrid and electric car models will increase fivefold, from 31 today to 159 by 2016.

Such a fast-growing category combined, as it is, with fast-changing technology is full of risk and opportunity. As the field gets more crowded, Prius, the category leader, will try and stay ahead of the pack while new players like Tesla look for a way to break in. Here are the risks and challenges for both brands with doomsday benchmarks added for effect.

Smug1 by Gamma Man (Flickr)

Toyota Prius is the undisputed green car leader with more than half of hybrid sales in the U.S. Prius owes its success to great positioning, choosing a technology that was green enough (but still practical) and a design that was distinctive enough to act as a conspicuous badge for its owners (but not as wacky as, say, the earlier models of the Honda Insight). 

As the current #1, Prius has to fend off the competition and it's planning to do that in classic leader fashion by launching new models to broaden its range and cater to different car buyer segments. It's trying to make sure it doesn't get outflanked. Its first new model will be the family-sized Prius V, then a smaller Prius C and sometime after a non-hybrid plug-in Prius. 

Doomsday benchmark: aol

The worst case scenario for Prius is that it becomes a victim of its own success, too strongly associated with hybrid technology (vs. newer, greener alternatives), too associated with a certain type of early-adopting, holier-than-thou consumer and too associated with a particular period in the evolution of the green car market. aol was forever associated with its CDs offering more and more trial hours and, as Bill Visnick, an analyst with Edmunds Auto Observer, has pointed out  Prius has its own association problems: "The fact is that it's very much known as a weeny sort of a car, and sort of a car for people who are driving too slow in the fast lane." 
 

Photo by NRMAdriversseat (Flickr)

Meanwhile, at the other end of the spectrum both in terms of image and sales is Tesla. Tesla has generated tons of publicity even though it has sold hardly any cars (less than 2,000 worldwide). As Fast Company says, Tesla's Roadster: "Changed the mainstream perception of EVs from clunky golf carts to sleek vehicles that can actually be driven on highways." But now the company has swerved in a new direction. The Roadster is being discontinued and Tesla is going to try and sell cars to the masses. These will be manufactured in Toyota's former NUMMI plant, the size of 88 football fields, and producer of 7.7 million vehicles in its 25-year life.

Doomsday benchmark: Webvan

The worst case scenario for Tesla is that it can't make the leap from hype to mass manufacturer in the one fell swoop now needed. That leap proved too much for Webvan, another company that committed millions to infrastructure before its business was established. Transitioning from a niche to mainstream is difficult enough  without adding in a huge plant that needs to be kept running.

There's no comparison really about the prospects of Prius vs. Tesla--the easy and safe bet is on Prius. It has some real challenges but nothing compared to the level of difficulty of Tesla, where the specter of DeLorean lurks in the perhaps not-too-distant shadows (as others have pointed out).

Is killing off the Picasa and Blogger brands a Plus?

According to Mashable, Google is going to rebrand Blogger and Picasa, two of its popular products. Blogger will be renamed Google Blogs and Picasa will be Google Photos. This is all part of an initiative to unify the brand portfolio ahead of the public launch of Google+, the company's latest and most significant social initiative.

Such a change certainly has the immediate advantage of signaling a strong, no prisoners, commitment to Google+. If the company is prepared to kill off two of its big brands to make the integration of Google+  smoother and more seamless, it's showing its determination to make this thing work.

Opinion is varied. A Huffington Post poll showed that 22% of people liked the change, 29% hated it and 49% were indifferent because "names don't matter." Arguing against the rational, names don't matter POV, Casey Chan at Gizmodo says: "I can go along with changing Picasa to Google Photos, it's an okay, undisgusting move. But swapping Blogger for Google Blogs? WHY?! That's unnecessarily generic. Evilly plain. Disgusting vanilla. Blogger is one of the tent poles of the Internet! You're not allowed to mess with those. I like + a little less now."

Casey's comment points to the potential downside of eliminating product brands in a portfolio in favor of a single brand. For all the benefits of a single brand, product brands bring important benefits of specificity and color. Without such brands, companies that do as many things as Google does can find it hard to compete against category specialists. Will the new social functionality of Google Blogs make it a viable competitor against WordPress?
 
It looks like Google recognizes that a single-branding approach has its limits because, apparently, YouTube is going to stay as-is (and not be renamed Google Videos). Just like some banks are "too big to fail," some brands are too big to be thrown away. What Casey expressed on behalf of Blogger, many more people would express on behalf of YouTube; the risk of consumer backlash outweighs any potential assimilation benefits. (Besides the company already had a Google Video product before and that didn't work out.)

As Ben Kunz pointed out in a recent post, Google has a classic branding challenge. It used to be something very specific (search) but, over the years, it's added more and more things (Gmail, Earth, Chrome, Earth, Talk, Offers .....), all great in their own way, but all doing their bit to cloud what Google is all about. Maybe Google+ will provide the glue that brings sense and meaning back. Or maybe it will become just another point of confusion.