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Should Anthill adopt the Groupon model?


Last week, I posted a story, titled If you owned Anthill (the business), how would you make it more profitable (quickly)?, which asked Anthill readers to suggest new revenue streams. The post was triggered by a theft (and the loss of some expensive equipment).

The surprising flood of responses to this post, received by phone, email, tweets, Facebook messages and, of course, your 34 comments had me both thrilled and alarmed.

Naturally, I was thrilled by the goodwill and ideas that this spontaneous Friday post generated. (Honestly, you had me smiling from ear-to-ear all week.)

But I was also slightly alarmed, simply because many of these responses were formed on the, thankfully incorrect, assumption that Anthill is in trouble (immediately conjuring images of that episode of The Simpsons where Homer curses Ned Flanders’ Leftorium. “What! Flanders is in trouble!”)

Fortunately, I’m pleased to say that 2010 has actually been quite kind to us.

We’re not living the pre-GFC halcyon days quite yet. But life is a darn lot more merry than early 2009, when we had ditched print, copped the expenses that come with closing a product line and still had not determined how to generate alternative revenue streams.

But unexpected developments, like theft (and other frustrating, trust kicking, morale knocking circumstances), force a person to look at the fundamentals of a business and ask those hard questions about the present, the past and the future — the sorts of questions that all media business should be asking themselves right now, at this disruptive turn in this industry’s evolution.

At the centre of my thoughts when writing this post was a strategic question that we’ve been using to develop our own business over the past 18 months. Here is that question.

What would Anthill look like without advertising?

It’s the sort of question that would have seemed outrageous only 12 months ago. Yet, I also suspect that the most successful media companies of the future will not be funded by advertising.

In fact, I heard a rumour recently (and if anyone can verify it, please do) that the UK’s Sun Newspaper made more revenue last year from selling budget flights (yes, aeroplane travel) than it did from advertising sales.

If this overheard snippet of dinner-party gossip is true, it questions one very important tenet about the business of media.

What is the function of ‘news’?

In March this year, I wrote a story that asked whether small business owners could be the next media barons. To me, the future of media can be found within the answer to another question.

Who profits most from owning the news?

For over a century, this question was easy to answer. The media industry obviously had the most to gain from owning the news because extraordinarily large amounts of profit could be made from selling attention. The model was simple:

Acquire the attention of consumers. Then rent it.

However, we all now understand that a seemingly limitless number of ways have evolved to reach a prospective customer or communicate a specific message to a pre-defined audience.

The money to be made by media companies from owning the news and renting the attention of consumers is still significant. But it’s no longer the cash cow it once was.

Furthermore, many smart marketers are beginning to realise that it’s also within their power to own the audience (rather than rent). And this is prompting a similar shift.

The future of media is moving from a model based on ‘content+advertising’ to ‘content+commerce’.

What does this mean for Anthill?

It was, therefore, extremely pleasing to observe that many of the suggestions prompted by the initial post intuitively reflect this transition… the possible shift of media away from over-dependence on one highly unreliable revenue stream (which is also very cashflow-unkind).

Suggestions ranged from the fun and extravagant, such as opening a coffee shop, to more sensible and logical extensions of existing revenue streams, such as event sales and the creation of a ‘paid area’. While many of the suggestions we’ve considered before (and some we’ve even already tested or have in the pipeline), the general theme was that Anthill needs to sell something more than advertising space.

And, after nine days of watching and listening, this is our response.

It might prove half-baked. But it meets several of our own criteria and, also, many of those identified by you, dear readers, in your suggestions and comments.

So, we’re considering the following model (depending on your feedback).

Should Anthill adopt the Groupon Model?

If you haven’t yet heard about Groupon (and its staggering rise to dotcom stardom), perhaps check out this post by Anthill ‘Contributor-At-Large’ Stefan Abrutat.

But if you don’t have time to read Stefan’s full post, Groupon is a Chicago-based startup that scored itself a $1.35 billion valuation within a year of launch by creating a business model that harnesses the power of collective buying to get consumers cheap products and services.

The company offers a deal a day (a bit like Anthill Cool Company Award 2009 Finalist, Catch of the Day) but only if a minimum number of ‘units’ are purchased. If not enough people sign up for the deal, the deal becomes unavailable and all purchases are refunded (everyone misses out).

Thus, the model exploits consumers’ growing use of social media platforms and peer-to-peer recommendation services to spread the word. It empowers while also incentivising consumers to promote the deal.

The model has proved so successful, so quickly, that Groupon clones have popped up in almost every corner of the globe, including Australia (such as Scoopon, Jump On It, Spreets, Ouffer and even MSN and PBL have now jumped on the bandwagon, with Cudo).

What these sites have in common is a model that offers largely ‘experiential’ deals, like restaurant meals, beauty treatments and theatre tickets.

But we were thinking, and I’m sure we’re not the first, what if this model was tweaked to involve the offer of business products and services? In other words, what if Anthill created a Groupon-esque model for startups and business owners?

The audience is ‘socially connected’. It is constantly on the look-out for a better deal. And we already have the merchant channels, the critical mass and the infrastructure to trial the model and give it a kick-start.

There’s only one problem.

Indeed, there are probably multiple problems (many of which you’ll likely outline below).

But at this nascent stage in the idea’s evolution, there is one particular factor that must be considered.

The reason why most of the existing Groupon-style businesses offer ‘experiential’ deals is because the margins associated with such products are flexible enough to allow significant discounts (often 60% off).

So, here is my question? What types of products and services do you need and require that are common to your fellow business owners and startups?

In other words, I’m looking for suggestions.

If Anthill were to develop and offer a Groupon-style service, what are the sorts of things that we should sell? In the wise words of Ryan Cross, “What can we do to provide you more value or what problems do you have that we might be able to solve by applying this approach?” What do you need?

Naturally, I’ll rustle up a copy of award winning documentary DVD The Corporation for the most thoughtful idea (or concept wrecking observation, in case this concept does prove half-baked).

So, should Anthill adopt the Groupon model?