Web Design Director, Jed Wylie was, once again, invited back on to Ed Marshall's Let's Do Business radio show. In this episode, Ed & Jed discuss some of the colossal web failures of the past and what we can learn from them.
Let's talk about failure.
I'm going to argue that failure is essential. In fact, it's vital to success. And, counterintuitively, if you're not failing, you're not learning and, therefore, you can't improve your business, your marketing or your website without failure.
Here’s a test … Think up five American global brands that are purely internet-based.
You’ve probably got a list a little like this:
But you could also have:
Now think up five British global brands that are purely internet-based.
Hmm… bit of a tumbleweed moment there!
So why is the case? How did the Americans come to dominate the web to such an extent? The reason is that they learned how to fail, and they learned how to fail through experimentation.
Failing To Impress
Let me illustrate this with a little bit of history. Let’s roll the clock back to 2001 when venture capital investment was rife in America. It was a crazy, weird and wonderful era particularly in Silicon Valley, California where “internet” was the buzzword.
Let's look at some of the more intriguing investments that took place during that time. One of them was a company called Flooz (total investment $50 million). The founders of Flooz, which, incidentally, is the Arabic for money, had the breath-taking idea that people would buy Flooz credits, which could be redeemed at any participating online store. In other words, you would hand over your money to a company who gave you credits which you could then use to buy things over the internet. However, they failed to spot that we were all happily using something already to buy things over the internet called ‘money’. So why would you want to use that pesky money stuff when you could buy Flooz credits which could only be exchanged in just a few stores? I think you can see the problem!
Whoopi Goldberg headed up the television advertising campaign – a decision that she must have almost instantly regretted after Flooz became embroiled in a crime syndicate and money laundering scheme that was uncovered by the FBI so Flooz and its competitor, Beenz were simultaneously declared bankrupt in 2001.
If an idea doesn't work in the real world, it stands little chance of success on the internet
The Americans learned an expensive lesson which is if the idea doesn't work in the real world, it stands little chance of success on the internet. The internet doesn't change the basic nature of a business it just, it just changes where that idea happens. If the business idea doesn't have credibility in the real world, then it won't work online.
It’s worth investigating any new business idea you have and examining whether it has a real-world appeal before putting it online. How would the idea benefit the customer? Remember just being ‘online’ isn’t itself a justification for a business idea.
Let’s look at another colossal failure: Pets.com who blew 82.5 million. They did have a credible business idea which was selling pet supplies online. However, their failure stemmed from spending $11.8 million on advertising before they did any research to see if a marketplace existed for the products. Nonetheless, they attracted serious investment. The warning signs that the market was just not as large as they thought was clearly evidenced by their total revenue only amounting to $690,000. In other words, they earned $1 for every $19 that they spent.
What really sealed their fate was that there were selling their products at a loss! They had hoped to gain ground in order to recover the money that they lost simply through sheer customers numbers. Sadly, the customers weren't out there. It was the short route to commercial suicide, and they collapsed nine months after launch.
The message here is that testing and measuring is the essence of success. You need to know your market and you need to test small and measure the response. Then you can determine how best to proceed based on your results.
Even the best idea’s success rests on a combination of market knowledge, experience and marketing
Let’s take one more example: Webvan. They spent a mind-numbing $1 billion (almost $1 million per day they were operational). It was an online grocery store – a pretty sensible idea and one we see replicated now the world over. However, none of the senior excess executives or the investors had any experience in the supermarket business. What killed them off was a misjudged desire to grow at a supercharged rate. They saw how successful Amazon was and used it as a model. However, Amazon had carefully created their infrastructure and how they acquired companies. It worked for Amazon but with fatal consequences for everybody else that tried.
Put simply, Webvan just expanded itself out of existence proving that its problems weren't about technology or infrastructure it was simply that they had too few customers. Only 2% of web users were buying online groceries at that time making them the wrong business at the wrong time.
Even the best idea’s success rests on a combination of market knowledge, experience and marketing.
Failing To Learn
What can we learn from this?
The Americans saw the internet as a new resource to exploit. Historically, it’s how they’ve grown – by recognising resources and exploiting them. For example, consider how they viewed real estate in particular during the gold rush of the 1850s or the skyscraper surge of the early 20th century. Or take space – the final frontier – which they also saw as a resource and is now colonised by their satellites. And space exploration led to the creation of Teflon, GPS, digital thermometers and more. What seemingly looked like crazy decisions on the part of Americans to go and burn vast amounts of cash resulted in new industries and revenue streams.
What they were doing was learning. They learned, what worked, and what didn't. They learned what sort of people they needed in internet businesses. They discovered how to structure an internet business. And they learned how to market online, putting them, even today, as the market leaders in online marketing.
And all those people who failed during the internet crash have now gone on to work for the likes of Google, Facebook and Twitter bringing their experience on how not to do it. Interestingly, that is the most likely explanation as to why California has the highest density of millionaires who were bankrupt. It’s almost seen as a necessity – if you haven't bankrupted yourself, then you haven't learned enough to warrant investment in your next business idea.
Failure isn't really failure. It's just a result,
All this illustrates that whilst failure can be embarrassing, what we learn from it is hugely important in the long run. And those lessons are there for everybody to learn from. We don't even have to experience failure ourselves; we can learn from other people's experiences.
For example, The Beatles were refused a recording contract because apparently guitar music was on its way out. Walt Disney was a bankrupt Marilyn Monroe was thought of as having no acting skills and not particularly attractive. There are many successes which started out as failures we can learn from.
Let’s take a real-world website example. Imagine you’ve built a website, and people are coming to it, but they're not converting – they're not turning into sales or enquiries. You could argue that's a failure. Equally, you could argue that what you're learning is how not to do it.
When you see something on your website failing, it's an opportunity to improve. It's an opportunity to give yourself a pay rise. For example, create a second version of the page and try a different headline, or a different price or a more compelling text, or a more obvious call to action.
Remember that failure isn't really failure. It's just a result. It's not good. It's not bad. It's just a result. If you think it’s bad it’s because you haven’t learned from it.
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