Welcome to ‘Seinfeld’ Marketing

In one of many famous episodes of the Seinfeld show, Jerry and George Costanza (Jason Alexander) were discussing a selling pitch to NBC for a TV series identical to the actual “Seinfeld Show.”  When asked what the show was about, the answer was “nothing.”  Here is the dialogue:

Occasionally, the investment and marketing communities fall in love with business concepts essentially about “nothing.”  The Dotcom boom/bust was about business ideas essentially about nothing and most of them failed.  While investors and lenders will occasionally become so enamored by exciting concepts that they are willing to overlook basic business model flaws – like the ability to make money.  Eventually, the Jerry Maguire (film starring Tom Cruise and Cuba Gooding Jr.) “Show Me The Money” phrase enters the conversation and the bubble bursts because there is no money. (I used that phrase – Show Me the Money – in a previous Wiglaf Journal article on Twitter.)

The principal remnants of the Dotcom era are Amazon and EBay.  Both survived because they were, in fact, able to generate profits.  Amazon had to change its entire business model to survive.  Selling books on-line was a loser, but making money from its backroom technology services turned out to be Amazon’s sustainable key to success.

Now we have the “social networking” phenomenon and this, too, is essentially about “nothing.”  When one thinks of business concepts we think of creators of  products and/or services generate revenues that exceed costs.  This is called profit and continuous, sustainable profitability creates shareholder wealth.  The social networking companies will need to created long-term revenue and profit-producing streams of income or they will not survive.

The Facebook IPO

The Facebook initial public offering (IPO) has the company valued over $100 billion.  One might argue that that was a bit absurd?  Where is the Facebook revenue stream?  The only thing that makes any sense would be to find advertisers willing to pay for exposure on Facebook pages when people access them to tell “friends” about themselves or learn about what their friends are doing.

Look how this whole things has played out.  Just days before the IPO, General Motors made the rather significant announcement that it is pulling its $10 million annual advertising off of Facebook because they have found their social advertising campaign to be “ineffective.” This announcement  prompted marketing consultant and author Mark Reino of MeritMile.com to comment:  “It’s relatively inexpensive to leverage technology that can provide immediate feedback on what elements of a marketing campaign are working.  Even large brands tend to follow the marketing herd, but analyzing marketing trends always reveals where the smart spending resides.”

Then, of course, there was the IPO itself and its aftermath including significant loss of stock valuation.  Contributing to this was the NASDAQ stock exchange’s serious errors in handling the initial trading of the Facebook stock.  In the long run, the success of failure of Facebook or any new stock offering will depend on the company’s ability to earn money and create sustainable wealth and value to its stockholders.

Then, There is Twitter

The premise of my recent Twitter article was the Silicon Valley debate as to if and when this company will ever turn a profit even though it possesses an unofficial capitalization of between $4 billion and $9 billion.   The problem is transforming Twitter into a money-making sustainable business.

While Facebook does show profit and loss, a market capitalization over over $100 billion will create major pressure to show huge top- and bottom-line increases on a quarterly basis.  If not, Wall Street might regard Facebook and the other social networking companies as they did the dotcom start-ups.