12th March 2012
Leaving aside why Mashable should be worth seven times as much as the Techcrunch valuation when AOL purchased it in September 2010, if the rumours are true, it's another acquisition of an in-fashion tech site. But does that make a positive statement about CNN's interest in technology and social media news or is it a negative over how far what is now seen as traditional news media is prepared to pay to stay in the game. Don't forget that CNN was once the new boy on the block.
Privately-owned Mashable has moved recently into business and entertainment coverage, substantially increasing the staff headcount. It already has close links with CNN and ABC News.
But it's not just news media which have to pay big bucks to defend their position. Advertising agencies have problems as well. The US industry sector, which includes UK giant WPP, has substantially underperformed the S&P 500 over the past year.
Don't tell Sid – he already knows
Comparing the forthcoming Facebook IPO with the privatisation of British Gas more than 25 years ago gives a snapshot of the sector's difficulties. Ad agencies make a fortune out of the Tell Sid campaign. There is nothing to be made from Facebook whose fame and fortune has spread thanks to social marketing. Incidentally, British Gas's two successor companies, BG Group and Centrica, are together roughly worth the same as Facebook's potential $100bn.
More generally, the move to Google-style individualised adverts leaves little room for the big campaign.
But if these blockbuster campaigns are dying – consumers have become too ad-savvy or simply fast forward or ignore them – big agencies are out there trying to grab bright social media and tech start-ups. The Mad Men have become Venture Capitalists, often in complex link-ups.
Advertising giant Publicis Groupe and Telecom France-Orange have teamed up with Iris Capital Management to come up with OP Ventures, a new European VC firm that intends to have three funds that will back European digital opportunities. The fund will start with a war chest of some €300m. OP Ventures Early Stage will invest up to 3 million euros in fledgling startups in France and Europe, a second fund will target more established companies while a third will look outside of Europe.
Black Sheep look for red hot prospects
In March 2011, UK ad agency Bartle Bogle Hegarty (BBH) linked up with Spark Ventures to create the Black Sheep Fund via Zag (BBH's brand invention business) and Spark Ventures – the London based VCs behind start ups including lastminute.com, Kobalt Music, notonthehighstreet.com and Moshi Monsters.
The Zag reasoning is basic. It says: "There is a dearth of seed funds for start ups. The banks demand personal guarantees for business loans, and institutions are incredibly risk averse. If you are proven entrepreneur with a string of successful exits under your belt, then you will get by. But if you are young, hungry and full of belief in your big idea – you might well get nowhere. The thing we spotted was that the next big digital business is just as likely to come from new entrepreneurs – and that is why we set up this fund." It hoped to raise at least £10m from investors.
Admittedly venture capital can be slow, but one year further on, the Black Sheep Fund website says: "Our site is currently under development. If you are a start up in search of creative capital, or an investor looking to share in our fund, do drop us an email."
Forget ads – go for PR
But some think the big ad agencies really are toast – even if they manage to pick up some interesting ideas on the way. Blogger Jason Keath suggests that public relations – a sort of half way house between traditional advertising and social media power – is the route to the future.
He says: "Maintaining connections with journalists is old PR (and still important). Today companies need to maintain relationships with influencers. This is a larger scale. These influencers are more numerous and more varied than their journalist counterparts. There are A, B, and C list bloggers, Twitterati, Youtube Stars and the list goes on. Other marketing segments have a lot to learn in this arena." And PR, Keath adds, is good at crisis management as well, something tech companies may increasingly need.
Interest in Pinterest
But the speed of change is so rapid that some have already written off Facebook as so last year (or even decade). Fans of Pinterest, which describes itself as "an online pinboard" say this is the category killer that Facebook most fears. Pinterest enthusiasts point out that it reached the critical 10m user mark faster than Facebook, and without spending a penny on conventional advertising. Its home page is very female-friendly with fashion, coo
king, babies and pets prominent so it is niche – unlike Facebook, which in appealing to everyone, could end up appealing to no one.
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