Back in the good old days, it was enough to produce an idea, stick “.com” after the company name, and wait for venture capitalists to throw suitcases full of money at you.
You didn’t need a revenue model, profit predictions or anything more than a basic business plan. All you had to do was declare that you were going to give away whatever you produced for free while advertisers pick up the bill, and investors would assume that companies would line up to give you their marketing dollars.
It didn’t quite work that way.
Once those early tech companies had finished giving away their investors’ money, all that was left was a pile of P45s… and the idea among consumers that they can have everything they want without paying for it.
For entrepreneurs who now want to charge for their products — especially if they’re Web-based — that creates a giant headache.
It Looked Good on Paper…
One company that provides a lesson in what businesses need to do to make ad-supported freebies a success is ABS Notebooks. Their product didn’t take years of coding to create and it’s unlikely to have absorbed millions of dollars during the development phase. It’s a notebook for students… with ads on the subject dividers.
The product itself is very simple. So is the reason it works, but it’s a principle that often gets forgotten when businesses start handing out objects to promote themselves.
The item that carries the ads is genuinely useful.
The company was started in 2006 by Avi Steinberg and Alejandro Bremer, two Kellogg Business School alumni who had grown fed up watching advertisers give students objects that no one wanted as a form of promotion.
“They were tired of seeing advertising dollars going to make key chains and cup holders, and decided to channel these dollars into a creative yet functional product: a notebook,” explains Ken Harris, a friend who was brought in to help launch the business. “[I]t was an opportunity to do good by students and help marketers optimize their brand messages while creating powerful brand experiences.”
After starting with 8,000 notebooks, to which the company gave the sexy name “Shadow,” ABS Notebooks will reach over 700,000 students nationwide in Fall 2008 and more than a million for the January 2009 edition. Advertisers have included Ford, Geico, Discover, Wrigley, P&G and Unilever. Ken Harris wouldn’t reveal how much the company charges for advertising but noted that because it’s a premium product, their fees a little higher than most other youth-oriented marketing vehicles and the campaigns are customized depending on the target area. The results for advertisers though have been impressive. Brand awareness has increased by between 56 percent and 146 percent; Wrigley’s Altoids saw a return on investment sixteen times the amount they paid for the campaign.
The Ads are Valuable Too
Part of that is down to the unique nature of the market. Students might not have high incomes but they spend everything they earn, and their wallets will grow once they graduate. They’re new consumers who tend to stay loyal to the brands they meet at school and they have close relationships characterized by strong peer pressure which makes viral marketing easy and natural.
But the success of ABS Notebooks also has much to do with the nature of the product. Unlike lanyards, cup-holders and key-chains, students are accustomed to paying for a notebook, so the item that carries the ads is likely to be picked up and used. In fact, according to the company’s website, each ad will be seen an average of 96 times over a four-month period.
“[I]t has to be something of value.” says Ken Harris. “ If your ‘something’ is just free, that’s when you’re just responding to price-sensitivity.”
Interestingly, the nature of the ads is important too. Had the ads been scattered at random throughout the notebook, there’s a good chance that they might have been removed by students who found them intrusive. Instead, the ads only appear on dividers and covers, and many provide discount coupons, giving students an added incentive to keep them and act on them. (STA Travel’s ad even includes a crossword, ensuring that students both look at the ad and keep their note pages doodle-free during lectures.)
It’s a model that Ken believes could work anywhere provided the product is valuable and the ads supportive of the item’s use rather than obstructive.
“Once you are able to identify the right ‘something’ and find a healthy balance between two complimentary party’s goals, you’ve got yourself an opportunity,” he says.